Indian IT Firms Expected to Report Muted Q3 Performance Amid Weak US Demand
India's top IT firms are expected to report subdued December quarter results with approximately 4% revenue growth and 5% profit increase, reflecting ongoing US demand weakness and client spending caution. TCS will start earnings season on January 12 with expected 4.2% revenue growth, while the sector faces headwinds from US tariff uncertainty and proposed visa fee increases. The Nifty IT index fell 12.6% in 2025 amid record foreign outflows of ₹8.5 billion from IT stocks.
*this image is generated using AI for illustrative purposes only.
India's information technology sector is bracing for another challenging quarter as the country's leading IT firms prepare to report earnings amid persistent weakness in US demand and cautious client spending patterns. The December quarter results are expected to reflect the ongoing struggles facing the ₹283 billion Indian IT industry.
Expected Financial Performance
Brokerages anticipate that the top six IT firms by revenue will deliver modest growth figures for the December quarter. The performance outlook shows a continued deceleration from previous periods.
| Metric | December Quarter (Expected) | September Quarter | Change |
|---|---|---|---|
| Revenue Growth (YoY) | ~4.00% | 6.50% | Decline |
| Profit Growth (YoY) | ~5.00% | - | - |
This represents a notable slowdown from the September quarter's 6.5% revenue growth, highlighting the prolonged demand softness affecting the sector. Indian software exporters last achieved double-digit revenue growth in the March quarter of 2023, when digital transformation and cloud adoption drove significant demand in the post-pandemic period.
Individual Company Projections
Tata Consultancy Services, the country's largest IT firm, will commence the earnings season on January 12. The company's performance is expected to reflect broader sector challenges.
| Company | Expected Revenue Growth (YoY) | Previous Year Growth |
|---|---|---|
| Tata Consultancy Services | ~4.20% | 5.60% |
| Infosys | ~8.10% | 7.60% |
| HCLTech | ~4.60% | 5.10% |
Most brokerages do not expect HCLTech to upgrade its fiscal 2026 annual revenue forecast of 2%-3%, while Infosys is unlikely to raise its forecast of 3%-5%. The cautious outlook reflects the challenging operating environment facing the sector.
Market Challenges and Headwinds
The Indian IT industry continues to grapple with multiple macro headwinds that are impacting performance. Key challenges include:
- US Market Uncertainty: Concerns about US tariffs and proposed ₹8.3 lakh visa fees
- Client Spending Patterns: Subdued technology spending amid economic growth concerns
- Holiday Impact: Fewer working days due to global client holidays affecting billing and revenue
- Operational Pressures: Margin pressure from furloughs and wage hikes at major firms
The sector's heavy dependence on the US market makes these factors particularly significant, as Indian IT companies derive a substantial portion of their revenue from American clients.
Market Performance and Investment Flows
The challenging operating environment has translated into poor market performance for IT stocks. US tariff uncertainty, visa concerns, and weak spending patterns drove record foreign outflows of ₹8.5 billion from IT stocks in 2025, representing nearly half of total foreign exits from Indian equities. The Nifty IT index declined 12.6% in 2025, making it the worst-performing sector as Indian markets lagged behind Asian and emerging-market peers.
Future Outlook and Potential Catalysts
Despite near-term challenges, some factors could provide support for the sector moving forward. Resilience in the banking, financial services and insurance segment, deal ramp-ups, early signs of artificial intelligence strategy formation, and rupee depreciation could offer support by mid-2026, according to six brokerages. Additionally, brokerages expect AI momentum to build over the next six months, with demand potentially picking up into 2026, though clients remain cautious about committing to large programs amid macro and technological uncertainty.
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